Dollar Holds Its Breath as Fed Minutes Loom Over Sluggish 2025 Finale

The Calm Before the Minutes

New York—Currency traders kicked their heels on the pavement outside the New York Fed Tuesday morning, coffee cooling faster than their conversations. Inside, screens glowed a reluctant green; the dollar index hovered at 103.12, unmoved for a third straight session. Everyone was waiting for the same thing: the release of the Federal Reserve’s December meeting minutes at 2 p.m. Eastern.

Why the Silence Speaks Volumes

Markets have priced in a 96 % probability that the Fed will stand pat in January, but what chair Jerome Powell told his colleagues over holiday eggnog remains the final clue to 2026’s first act. "When the street is this sure of a pause, the minutes become the only plot twist left," said Imani Walters, G-10 strategist at RiverStone Macro.

Sluggish End-of-Year Data Adds Fog

Fresh numbers did little to jolt the greenback awake. December payrolls rose just 88 000, the weakest since 2021, while core PCE inflation stayed stuck at 2.8 %. The Atlanta Fed’s GDPNow tracker has Q4 growth penciled in at a meager 0.9 % annualized—hardly the momentum bulls had hoped for.

"The economy is idling in neutral," said Claudia Hamm, chief economist at BNY Mellon. "The Fed’s next move depends on whether inflation or employment blinks first."

What Traders Are Watching in the Minutes

• Any hint of dissent on the 4.25–4.50 % rate hold
• Language around "restrictive for longer" versus "data dependent"
• Discussion of balance-sheet runoff pace—still $95 billion a month

Dollar’s Year-End Scorecard

The buck is set to finish 2025 up 2.1 % on a trade-weighted basis, its smallest annual gain since 2020. Against the euro it has surrendered 1.4 % since October; versus the yen it clings to a 5 % year-to-date rise, though Tokyo’s rumored intervention level at ¥158 keeps option desks on edge.

Meanwhile, emerging-market pairs tell a different story. The Mexican peso has rallied 6 % in the last six weeks on carry demand, while China’s yuan touched a four-month high after Beijing relaxed outbound travel rules—signs that global investors still prefer yield over the dollar’s safe-haven shine.

Looking Ahead: January’s Triple Header

After the minutes, traders will pivot to three catalysts: the Jan 10 non-farm payrolls, Jan 14 CPI, and the Jan 28–29 FOMC decision. "If payrolls print below 100 k again, the market could start pricing 50-basis-point cuts by March," said RiverStone’s Walters. "That’s when the dollar’s sleepy drift could turn into a sprint."

For now, the greenback sits like a coiled spring—steady, but ready to snap in either direction once the Fed’s ink dries.